Suppose Your Firm Is Considering Investing in a Project with the Cash

question 28

Multiple Choice

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are two and two and a half years, respectively. $$\begin{array} { l l l l l l l } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash Flow } & - 125,000 & 65,000 & 78,000 & 105,000 & 105,000 & 25,000\end{array}$$ Use the discounted payback decision rule to evaluate this project; should it be accepted or rejected?

• A)1.77 years, reject
• B)1.94 years, accept
• C)2.06 years, accept
• D)3.00 years, reject

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Definitions:

Macula Densa

Cells of the distal convoluted tubule located at the renal corpuscle and forming part of the juxtaglomerular apparatus.

Collecting Duct

A network of tubules and ducts that function in the kidney to transport urine from the nephrons to the renal pelvis for excretion.

Distal Convoluted Tubule

Convoluted tubule of the nephron that extends from the ascending limb of the loop of Henle and ends in a collecting duct.

Dual Approach

In economics, a methodology or analysis technique that involves examining problems from both sides or using two complementary perspectives or sets of tools.